Republican Keynesians Come Out of the Woodwork to Oppose Sequestration

Beginning with the very first policy-oriented post on this blog, I’ve been criticizing Keynesian economics, usually with lots of cheering and support from the GOP. Indeed, more than 98 percent of Republicans in the House and Senate voted against Obama’s so-called stimulus.

They understood – or at least seemed to understand – that you don’t create jobs by diverting money from the private sector so it can be spent by politicians in Washington.

And they have the satisfaction of seeing history justify their votes. Unemployment rose after the faux stimulus was enacted and the joblessness rate has stayed above 8 percent.

But some Republicans are now sounding like born-again Keynesians. They object to the automatic budget savings – known as sequestration – that are scheduled to take effect next year, and they are warning that less government spending means fewer jobs. Here’s a small sampling of their statements.

• Cong. Rob Bishop of Utah claims a sequester will “destroy jobs.”
• Sen. Roger Wicker of Mississippi asserts that “up to 1 million jobs are at risk.”
• Gov. Bob McDonnell of Virginia says that sequestration is “putting hundreds of thousands of jobs in my state at risk.”

I would have no objection to these lawmakers arguing against a sequester if they based their concerns on national security, even if I think those concerns are exaggerated.

And I would understand if they objected to a sequester because defense is disproportionately impacted (the Pentagon accounts for only about one-fourth of the budget, yet it absorbs one-half of the sequester).

And I wouldn’t even complain if they claimed that a sequester is painful because of short-term economic dislocation and transition costs. Heck, I even said that might be a legitimate excuse when Mitt Romney said something that sounded suspiciously Keynesian.

But it doesn’t seem like those caveats apply.

Let’s close with some good news and bad news. The good news is that I don’t actually think any of the anti-sequestration lawmakers are genuine Keynesians.

The bad news is that they are genuine politicians, so they think there is nothing wrong with using the coercive power of government to take as much from the rest of the country as possible and redistribute those resources to their states or districts.

They may vaguely understand that big government undermines economic performance, but that’s a secondary concern. They’re main goal is buying votes with other people’s money.

P.S. You can peruse some good cartoons about Keynesian economics by clicking here, here, here, and here.

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Sequestration Does Not Endanger America’s National Security

The left wanted to get one thing from the Supercommittee, and that was to seduce gullible Republicans into a 1990-style tax increase deal in order to enable bigger government.

But I was pleasantly surprised when GOPers failed to surrender, which means that taxpayers didn’t get raped and pillaged. But winning a battle is not the same as winning a war.

The real fight is now whether the sequester is allowed to happen. In other words, will politicians preserve the provision that will automatically slow the growth of the federal budget so that spending over the next 10 years  grows by about $2.0 trillion rather than $2.1 trillion.

This may not seem like much of an achievement, but it is a very important indicator of what will happen in the future. If we want to protect against higher taxes in the long run, we need to figure out how to restrain government spending.

At the very least, this means following Mitchell’s Golden Rule so that the private sector grows faster than government. This would slowly but surely shrink the burden of federal spending as a share of economic output, though actual spending cuts would be preferable and they would more quickly get us where we need to be.

The main obstacle to the sequester, at least on the right, is that it would slow the growth of the defense budget. According to recent calculations, the Pentagon budget would increase by only about $100 billion over the next 10 years if the sequester is implemented.

That might not be enough to keep pace with inflation, and some are wondering whether this puts America’s national security at risk. But  this chart, which was developed by Cato Institute colleagues, shows that the United States dominates global defense spending.

Not only does the United States account for 48 percent of total defense spending, our allies in Europe and the Pacific Rim account for another 24 percent of military outlays.

And even if we use an absurdly expansive definition of possible enemies (Russia, China, all of Central/South Asia, and the entire Middle East and Africa), the military expenditures by those nations and regions don’t even amount to one-fourth of the world total.

More important, the combined spending by all potential adversaries is only about one-half of what the United States is spending, and only one-third of the combined spending of the United States and our allies.

This isn’t an argument for blindly slashing the defense budget. Nor is it an argument that says a sequester is the best way to prune military spending. But it certainly suggests that some modest restraint won’t put America in danger.

Moreover, perhaps the sequester will trigger some much-needed analysis of how best to protect America’s national security.

Maybe Mark Steyn and Steve Chapman are correct and it is time to revisit our spending on NATO, an alliance that was put together to fight the Warsaw Pact, an adversary that no longer exists.

Perhaps it means we shouldn’t spend huge sums of money to defend South Korea, which is far richer and stronger than its crazy northern neighbor.

Or maybe it means that the United States shouldn’t be engaged in nation-building exercises that exacerbate anti-American sentiment in other nations.

I’m not a defense/national security expert, so I don’t pretend to know the right approach to all of these issues.

But I have some familiarity with the way things get done in Washington. Politicians, lobbyists, interest groups, and bureaucracies will all act like the world is coming to an end if budgets are not endlessly expanded. That’s just as true for the Pentagon as it is for all other parts of the federal government.

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Yes, We Should Cut the Defense Budget

There are very serious ways to save huge amounts of money from the defense budget, largely by making smarter choices about defining America’s national security.

This obviously involves high-profile decisions about whether it is smart to engage in nation-building in Iraq and Afghanistan. But it also involves what seem to be “gimme” choices about whether we should be spending tens of billions of dollars to maintain troops in places such as Germany, the United Kingdom, South Korea, and Japan.

And, sometimes, it’s just the simple fact that bureaucracies like to squander money. Here’s a $600,000 boondoggle that barely rises to the level of a rounding error in the Defense Department’s budget, but it is a nauseating example of how government wastes our money in genuinely spectacular ways. Every time some politician says we need to raise taxes, you should think of this piece of you-know-what and  say #*&@;^ No!

Here are the key passages from a U.S. News and World Report story.

A $600,000 frog sculpture that lights up, gurgles “sounds of nature” and carries a 10-foot fairy girl on its back could soon be greeting Defense Department employees who plan to start working at the $700 million Mark Center in Alexandria, Va. this fall. That is unless a new controversy over the price tag of the public art doesn’t torpedo the idea. Decried as wasteful spending that will be seen by just a couple thousand of daily workers who arrive on bus shuttles, foes have tried to delay the decision, expected tomorrow, April 1. But in an E-mail, an Army Corps of Engineers official said that the decision can’t be held up because it would impact completion of the huge project. …The Mark Center is one of the facilities that thousands of defense workers will be reporting to as part of the Base Realignment and Closure plan, or BRAC, that is shifting workers around Virginia and Maryland. The BRAC plan itself has been criticized as wasteful.

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Tea Parties, Defense Spending, Overpaid Bureaucrats, Green Energy, and International Taxation

These are the issues I discuss in this wide-ranging Fox Business News interview.

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